The Central Bank of Kenya was yesterday forced to intervene in the foreign exchange market by selling dollars to support the shillings as increased political pressure weighed on the local currency.
A commissioner of the electoral body resigned yesterday, barely a week to a repeat election, causing more uncertainty in the markets.
Traders said the regulator sold unspecified amount of dollars that helped the shilling stabilise at 103.20/40 against the greenback.
The shilling has largely remained stable in recent weeks despite increased political activity ahead of a repeat election on October 26.
“They (central bank) were in selling dollars. The spot rate had gone up on some corporate demand to about 103.30/50, but came down to 103.20/40 afterwards,” a trader at a local commercial bank told the Business Daily.
“There is a possibility that political activity is causing this. Going forward people are looking to stay safe in the dollar ahead of the re-run. It has caused some anxiety,” he added.
The resignation of Roselyne Akombe, one of the commissioners of the electoral agency, is the latest twist in the country’s political crisis that saw President Uhuru Kenyatta’s election on August 8 vote nullified by the Supreme Court and the main opposition protagonist Raila Odinga withdraw from the re-run.
Mr Odinga’s opposition party, Nasa, has in recent weeks called for national wide demonstrations by its supporters to push for electoral reforms and postponement of the fresh election.
Traders said the central bank is, however, in a good position to prop up the shillings due to its high foreign exchange reserve levels, now at $7.373 billion — a 4.90 month import cover and above the required four-month cover.
The bank’s reserves fell from a five-month import cover week-on-week after it sold undisclosed amount of dollars last week to buoy the shilling.
Increased remittances by Kenyans living abroad and earnings from horticultural exports are also expected to lend some support to the shilling.
Diaspora remittances to Kenya hit a record-high of $166 million in August and are set to surpass the amount received in 2016, according to central bank data.
The shilling has fared relatively well compared to commodity export-oriented African currencies over the past several months.d